FCA issues Ucis warning to discretionaries

The Financial Conduct Authority has warned discretionary fund managers to be cautious when placing “ordinary” retail investors’ cash into unregulated collective investment schemes (Ucis).

The warning comes as the regulator publishes its policy statement PS13/3 ‘Restrictions on the retail distribution of Ucis and close substitutes’.

The final rules mean that, in the retail market, promotions of Ucis, which the FCA says are “often riskier and complex fund structures”, will generally be restricted to sophisticated investors and high net worth individuals for whom these products are “more likely to be suitable”.

It also said discretionary portfolio managers should also take note that the “marketing restriction expresses a regulatory view that non-mainstream pooled investments are unlikely to be suitable for ordinary retail investors”.

“So a discretionary manager should exercise particular care when placing ordinary retail investors’ money into these products, to satisfy him or herself that it is suitable for each particular client and is in the best interests of that client,” the regulator said.

It added that in a “true discretionary service” - where transactions can be made without the client’s prior approval - that “prior discussion of the investment will not amount to a promotion if that discussion does not amount to an invitation or inducement to invest”.

The FCA said investments that will be subject to the marketing ban include units in qualified investor schemes, traded life settlements, units in Ucis, and securities issued by special purpose vehicles pooling investment in assets other than listed or unlisted shares or bonds.